ARLINGTON, Va.–The CFPB’s focus on what it is calling “junk fees” is a “gross mischaracterization,” NAFCU has told the Bureau.
By calling the fees assessed by credit unions “junk fees,” NAFCU said, “merely stokes fear and further misunderstanding of the financial services marketplace and the resources available to consumers to guide them through the purchase of the products and services they need.”
NAFCU sent its comment in response to a Request for Information by the Bureau.
In its letter, NAFCU said it supports “fair, transparent, and competitive markets for consumer financial services” and is happy to work with the CFPB, but cautioned that “increasing the amount of required disclosures or mandating that contingent fees be included in a lump-sum price would only further confuse and frustrate consumers that may have varying demands for convenience. NAFCU urges the CFPB to continue to study the markets and products listed in the RFI before taking any supervisory or regulatory action because the Bureau’s current data and analyses do not suggest an unfair or underregulated environment.
“In fact, consumers could benefit from further modernization and clarity on existing Bureau regulations to improve access to these services and establish a fairer market that allows consumers to reach their financial goals,” NAFCU continued.
Some of the Points Raised
Points raised by NAFCU in its letter include:
- NAFCU said it objects to the CFPB’s characterization of financial services fees as “junk fees,” “excessive or exploitative fees,” or “inflated or surprise fees,” as “these fees bear no resemblance to the type of hotel and resort fees referenced in the RFI and, in contrast, are all subject to comprehensive federal or state laws and regulations; are not unfair, deceptive, or abusive; and consumers are well-informed of the fees. Credit unions do not obscure the cost of their products and services…”
- Required disclosures have made “significant positive impacts on consumers’ understanding of financial product pricing, provided for better comparison shopping, and improved consumer repayment behavior.” NAFCU noted CUs must already comply with existing mandatory disclosure regimes, including Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), TILA-RESPA Integrated Disclosures (TRID), the HUD-1 Settlement Statement, the Electronic Fund Transfer Act (EFTA), and the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Those laws and others have worked to discourage surprise fees by requiring financial institutions to conspicuously disclose fee schedules, NAFCU said.
- “State law also governs the contractual relationship between financial institutions and consumers insofar as the agreement for a particular product or service is valid and legally enforceable,” NAFCU said. “These state laws provide certainty and predictability to financial transactions and valid contractual arrangements, where the terms are clearly and conspicuously disclosed, should be respected.
- The CFPB’s “examination procedures and authority to regulate unfair, deceptive, and abusive acts or practices (UDAAP) also ensures that credit unions and other financial institutions are “clearly and prominently disclos[ing] the fees, penalties, and other charges that may be imposed and the reason for the imposition.”
- NAFCU stated that if disclosures follow the supervision guidelines, a perceived need for improvements to these disclosures and enhanced consumer education does not equate the fees outlined in those disclosures to “junk fees.”
- NAFCU said its member CUs often report their members are frustrated and confused by the volume of required disclosures, despite “their best efforts to educate consumers about the importance of these disclosures and the information they contain regarding the terms and fees of products and services. To this end, instead of pushing the bounds of statutory authority to regulate fees in connection with consumer financial products and services, the CFPB should be engaged in broad consumer education initiatives regarding financial disclosures.”
- According to the trade group. survey results indicate that the majority of credit union members have opted into overdraft or courtesy pay programs. “NAFCU recommends the Bureau continue to collect data and information about consumer use of overdraft products, consumer preferences, and the impact that any changes to the regulatory framework for overdraft programs would have on consumers.”
- “Limiting or attempting to regulate out of existence legal and properly disclosed fees may lead to unintended consequences,” NAFCU wrote. “The revenue collected from certain fees subsidizes other products and services that credit unions offer, like free checking accounts, but also competitive rates on loan products and preferred interest rates…Unsurprisingly, about 42% of credit union respondents said that the revenue from these fees would not be recouped, making it difficult to maintain a positive bottom line and impacting their ability to serve the communities that most need access to financial services.”
- NAFCU said the CFPB should carefully consider whether any efforts within its limited authority to regulate fees would lead to higher costs for financial products and services and consequently impact financial institutions’ ability to serve certain communities.
- “Most concerning is the impact changes to overdraft policies might have on low-income rural areas, where big banks have already been closing branches in recent years,” NAFCU stated.
Stoking Fear
“The CFPB’s gross mischaracterization of fees that are subject to substantial federal and state laws, contracted for by the financial institution and the consumer, and clearly and conspicuously disclosed upfront before transactions are completed, as ‘junk fees’ merely stokes fear and further misunderstanding of the financial services marketplace and the resources available to consumers to guide them through the purchase of the products and services they need,” NAFCU wrote. “Fees are not simply imposed to generate revenue and take advantage of consumers’ mistakes or misunderstandings about the products they are using, but are rather business decisions made to account for the risk associated with certain products and services.”
Don’t Forget to Check the Spam Folder!
Don’t forget to check your Spam/Junk email folder if you haven’t been receiving your free, popular and daily CUToday.info news headlines email.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.